Bennett v Bosco Investments Ltd

An unpaid former office-holder may have standing as a creditor to apply for an administration order, provided the evidence establishes a sufficient claim to remuneration. The court must also be satisfied that the company is, or is likely to become, unable to pay its debts and that administration is reasonably likely to achieve an objective in Schedule B1 to the Insolvency Act 1986.

In deciding whether administration would produce a better result for creditors as a whole, the court considers the aggregate return to creditors. A difference in the distribution between creditors caused by set-off does not itself make the result better or worse. Avoidance of liquidation fees and other costs may nevertheless establish a substantial benefit.

The applicant was one of two former joint administrators of Bosco Investments Ltd. The company had been dissolved after its assets were realised, but was later restored to the register when a potential claim for redress concerning interest-rate hedging products emerged.

The applicant sought an administration order under rule 3.3 of the Insolvency Rules 2016 and paragraph 12 of Schedule B1 to the Insolvency Act 1986. He relied on unpaid remuneration from the earlier administration to establish creditor standing. The issues were whether he had standing, whether the company was unable to pay its debts, and whether administration was reasonably likely to achieve a statutory purpose more advantageously than compulsory winding up.

1. The application was granted. Mr Michael Solomons and Mr Andrew Pear were appointed joint administrators, subject to the terms of the order.
2. The approval of the former administrators’ proposals gave them authority in principle to draw remuneration from assets under their control. Although the evidence concerning the applicant’s personal entitlement and arrangements with his firm was imperfect, he appeared to have a claim to approximately one half of the unpaid time costs. That was sufficient, at this stage, to establish standing as a creditor under paragraph 12.1(c) of Schedule B1.
3. The court applied the three requirements identified in Thunderbird Industries LLC v Simoco Digital UK Ltd: creditor status, present or prospective inability to pay debts, and reasonable likelihood that administration would achieve the statutory purpose. The first two requirements were satisfied.
4. The relevant statutory purpose was achieving a better result for creditors as a whole than compulsory winding up, or realising property for secured or preferential creditors. The proposed administration was likely to save approximately £28,000 to £35,000 in liquidation-related fees and costs. This was an appreciable benefit.
5. The possibility of set-off did not alter that conclusion. Whether set-off applied affected the allocation of the aggregate recovery between creditors, but did not change the amount paid to creditors as a whole.
6. The court left open whether particular professional and advisory costs incurred in pursuing the redress claim were properly payable from company assets. That issue was for the administrators to investigate and, if necessary, bring before the court.